CHINA CITIC BANK INTERNATIONAL LTD v. TUS-HOLDINGS CO., LTD

HCA 2487/2024

[2025] HKCFI 5264

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2487 OF 2024

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D E C I S I O N

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1.  This is the appeal of TUS-Holdings Co Ltd (the “Defendant”) against the order of Master Kinsey Kang dated 16 June 2025 (the “Order”). The Master entered judgment for China Citic Bank International Limited (the “Plaintiff”) in the total amount of US$643,949,900 (comprising the outstanding principal amount of US$522,500,000); further interest on the outstanding principal amount at the judgment rate from the date of judgment until full payment; and costs against the Defendant.

Factual background

2.  This case concerns bonds of US$550 million (“Bonds”) which were originally due in 2022. The issuer, Tuspark Forward Limited (“Issuer”) is the Defendant’s wholly-owned subsidiary.

3.  The Issuer as issuer, the Defendant as parent guarantor and China Construction Bank (Asia) Corporation Limited (“Original Trustee”) as trustee entered into an amended and restated trust deed (“Trust Deed”) on 15 August 2021 with a new maturity date of the Bonds of 13 May 2024[1].

4.  Also on 15 August 2021, the Defendant and the Original Trustee executed the amended and restated deed of guarantee (the “Guarantee”). The Defendant agreed[2] to guarantee to the Trustee the payment of all sums expressed to be payable from time to time by the Issuer under the Bonds. Specifically, the Defendant agreed inter alia that

(i)  the Defendant as Parent Guarantor shall pay any sum expressed to be payable by the Issuer under the Trust Deed before close of business on that date if the Issuer fails to pay the same (Clause. 2.1);

(ii)  the Defendant agreed to be liable as the sole principal debtor and not merely as a surety (Clause 2.2); and

(iii)  the Guarantee shall ensure for the benefit of the Trustee and any successor trustee under the Trust Deed on behalf of itself and the Bondholders (Clause 5).

5.  It is common ground that the Issuer and the Defendant have been in default since 13 August 2022 by failing to make repayments pursuant to the Trust Deed.

6.  On 3 November 2023, the Original Trustee declared the Bonds immediately due and payable.

7.  By a Deed of Retirement and Appointment (the “DRA”) executed on 20 June 2024 by inter alia the Original Trustee, the Issuer, the guarantors (“Guarantors”, including the Defendant) and the Plaintiff, the Original Trustee retired and the Plaintiff was appointed as the successor trustee in place of the retiring Original Trustee.

8.  The Plaintiff who has acted as the Trustee of the Bonds since 20 June 2024 commenced these proceedings to enforce the Guarantee against the Defendant (the Parent Guarantor) and sought summary judgment that the Master granted.

9.  The Defendant now contends that the Plaintiff was not properly appointed as Trustee of the Bonds because the Trust Deed requires an extraordinary resolution for trustee appointment. Although an EGM was held on 20 June 2024 (the “2024 EGM”) at which, inter alia, an extraordinary resolution was passed relating to the Plaintiff’s appointment (the “Resolution”), the Defendant’s stance is that as the 2024 EGM was inquorate. The absence of the registered bondholder, DB Nominees or its proxy meant that the Resolution was not an extraordinary resolution within the meaning of the Trust Deed.

10.  The allegation that the Plaintiff’s appointment was invalid first arose when Zhao Hui (“Mr Zhao”) filed his affirmation (“Zhao 1^st”) in opposition to the Plaintiff’s claim on 2 April 2025, some 10 months after Mr Zhao executed the DRA on behalf of the Defendant.

11.  The EGM was convened and arranged by the Issuer which is the Defendant’s wholly-owned subsidiary. Mr Zhao, the Defendant’s vice president and the CFO, is also the sole director of the Issuer. It follows that everything issued by the Issuer would be known to and approved by Mr Zhao.

12.  Further, although Mr Zhao and other representatives of the Defendant attended the EGM, they never raised any quorum objections. The DRA the Defendant itself executed after the EGM described the Plaintiff as the successor trustee.

The Trust Deed

13.  The following provisions are relevant:

“1.1 Definitions: In this Trust Deed (including the recitals hereto), the following expressions have the following meanings:

‘Bondholder’, ‘holder of the Bonds’ or, in respect of a Bond, ‘holder’ means a person in whose name a Bond is registered in the register of holders of the Bonds (or, in the case of joint holders, the first named thereof);

‘Extraordinary Resolution’ has the meaning set out in Schedule 3;

‘Global Certificate’ means a Certificate substantially in the form set out in Part A of Schedule 1 representing Bonds that are registered in the name of a nominee of the Common Depositary and/or of any other alternative clearing system;

1.3 Headings: Headings shall be ignored in construing this Trust Deed.

17 Appointment, Retirement and Removal of the Trustee

17.1 Appointment: Subject as provided in Clause 17.2 below, the Issuer has the power of appointing new trustees but no one may be so appointed unless previously approved by an Extraordinary Resolution. A trust corporation will at all times be a Trustee and may be the sole Trustee. Any appointment of a new Trustee will be notified by the Issuer to the Bondholders as soon as practicable. Upon such appointment, the new trustee shall succeed to and become vested with the rights, powers, duties and discretions of the Trustee and the Trustee shall be discharged from any further duties and obligations hereunder. The parties hereto agree to execute all such documents as may be necessary to effect such a change of trustee.

17.2 Retirement and Removal: Any Trustee may retire at any time on giving at least 45 days' written notice to the Issuer and the Guarantors without giving any reason or being responsible for any costs, charges or expenses occasioned by such retirement or the appointment of a new Trustee, and the Bondholders may by Extraordinary Resolution remove any Trustee without the Trustee being responsible for any costs occasioned by such removal, provided that the retirement or removal of a sole trust corporation will not be effective until a trust corporation is appointed as successor Trustee. If a sole trust corporation gives notice of retirement or an Extraordinary Resolution is passed for its removal, each of the Issuer and the Guarantors will use all reasonable endeavours to procure that another trust corporation be appointed as Trustee but if it fails to do so by the day falling 15 days prior to the expiry of such 45 days' notice period or, as the case may be, by the day falling 30 days after the passing of such Extraordinary Resolution, the Trustee shall have the power (at the cost of the Issuer) to (i) petition any court of competent jurisdiction for its resignation provided that it has notified the Issuer and the Guarantors prior to it doing so or (ii) appoint another trust corporation selected by the Trustee as its successor. If such petition is granted or such trust corporation is appointed, the Trustee shall notify all transaction parties in writing of its resignation. The Trustee shall not be responsible for monitoring or supervising any such new Trustee.”

14.  Schedule 3 contains provisions for meetings of Bondholders. Relevant provisions include the following:

“1.6 ‘Extraordinary Resolution’ means a resolution passed (a) at a meeting duly convened and held in accordance with this Trust Deed by a majority of at least 75 per cent. of the votes cast, (b) by a Written Resolution or (c) by an Electronic Consent;

1.7 ‘meeting’ means a meeting convened pursuant to this Schedule by the Issuer, or the Parent Guarantor or the Trustee and whether held as a physical meeting or as a virtual meeting;

…

1.12 references to persons representing a proportion of the Bonds are Bondholders or agents holding or representing in the aggregate at least that proportion in principal amount of the Bonds for the time being outstanding;”

15.  The present case concerns a serving Trustee who wishes to retire. It is thus common ground that Clause 17.2 is the relevant provision.

(A)  Proper construction of Clause 17

16.  Mr Terrence Tai, counsel for the Defendant, submits that no one can be appointed trustee unless previously approved by an Extraordinary Resolution as defined in the Trust Deed. He reaches that conclusion on the basis that Clause 17.1 is the exclusive clause[3] that deals with the appointment of new Trustees.

17.  His reasons are as follows:

(i)  the purpose of Clause 17.2 is to provide a mechanism for both the Issuer and the Guarantors to “procure” the appointment of a new Trustee where, as here, the Original Trustee retires. It is different from the default position in Clause 17.1 which confers the power of appointing a new Trustee to the Issuer solely and to that extent, Clause 17.1 is “subject to Clause 17.2”;

(ii)  there is a difference in the choice of language in that the obligation of the Issuer and Guarantor is “to procure” an appointment whereas the power of the Original Trustee is to “appoint a successor”; and

(iii)  the former requires the Issuer and the Guarantor to take steps to convene a Bondholder Meeting and obtaining Bondholder’s approval in the form of an Extraordinary Resolution to approve the proposed new Trustee.

18.  The Defendant’s construction of Clause 17 is premised on the Bondholder being treated as the absolute owner of the Bond under the Trust Deed[4].

19.  Mr Anson Wong SC and Mr Paul Law, counsel for the Plaintiff, prefaced their submissions with the observation that apart from the Defendant, no one has questioned the status of the Plaintiff as trustee of the Bonds that are in default. The only issue the Court needs to determine is whether the standing of the Plaintiff as trustee of the Bonds gives rise to any triable issue.

20.  Clause 1.3 of the Trust Deed mandates that “Headings shall be ignored in construing this Trust Deed”.

21.  The Plaintiff submits that Clauses 17.1 and 17.2 together address 3 distinct situations of trustee succession:

(i)  trustee replacement by the Issuer (Clause 17.1);

(ii)  trustee retirement and succession (Clause 17.2); and

(iii)  trustee replacement by the Bondholders (Clause 17.2).

22.  Clause 17.1 covers the situation where the Issuer on its volition appoints new trustees. Clause 17.2 covers entirely different situations, namely:

(i)  where the Trustee retires voluntarily on giving at least 45 days’ written notice to the Issuer and the Guarantors, or

(ii)  where the Bondholders wish to remove the Trustee from office.

23.  The Plaintiff submits that the Trust Deed does not require an Extraordinary Resolution in circumstances where a former trustee desires to retire as opposed to the case of trustee replacement by the Issuer.

24.  Under §22(i) above, if a sole trust corporation gives notice of retirement, each of the Issuer and the Guarantors will use all reasonable endeavours to procure that another trust corporation be appointed as Trustee. In the event that the Issuer and the Guarantors fail to procure such appointment by the specified period[5], the Trustee is given certain powers including the power to appoint another trust corporation selected by the Trustee as its successor (the “default position”).

25.  Of the 3 situations set out in §21 above, the requirement of an Extraordinary Resolution is expressly imposed in situations (i) and (iii) but not in (ii), although situations (ii) and (iii) are governed under the same clause. There is thus no requirement that the appointment following a voluntary retirement has to be preceded by an Extraordinary Resolution approving the entity to be appointed.

26.  The Plaintiff submits that the principle of expressio unius est exclusio alterius is applicable. That principle is summarised in Lewison, The Interpretation of Contracts (6^th Ed), 381 in these terms:

“Where the contract expressly mentions some things, it is often to be inferred that other things of the same general category which are not expressly mentioned were deliberately omitted[6].”

27.  The specific inclusion of the requirement in situations (i) and (iii) and its deliberate omission in situation (ii) is significant because it demonstrates a clear and intentional choice. McPherson observed in SCN Pty Ltd v Smith [2006] QCA 360 at §7[7] that

“[I]f one alternative is expressly and specifically mentioned, it rationally tends to exclude the implication of another or of any other.”

28.  The Trust Deed is a professionally drawn document in which the draftsman has expressly dealt with the requirement of an Extraordinary Resolution in specific situations. The deliberate omission of the requirement invites the application of the more significant canon of construction, namely, that which would suggest that where it has not been expressly referred to, that would be likely to be a deliberate decision by the draftsman to exclude that requirement: per Waller LJ in Shell UK Ltd v Total UK Ltd [2010] 3 All ER 793, cited in Best View at §25.

29.  The parties also differ as to the meaning and significance of the provision “to procure that another trust corporation be appointed as Trustee”. The Defendant’s stance is that if the draftsman had intended that to be a power of appointment, he would have used the word “appoint” rather than “procure”. The Defendant maintains that the obligation on each of the Issuer and the Guarantors is to convene a meeting within Schedule 3 for the appointment of the proposed new trustee by an Extraordinary Resolution by the specified period, failing which the default provision would apply.

30.  The Defendant’s approach involves reading into that provision an obligation that is simply not stated. When a voluntary retirement occurs, the Issuer and the Guarantors have to identify suitable candidates. The word “procure” means to secure or obtain. Had an Extraordinary Resolution been intended, one would expect that requirement to be specifically mentioned as for situations (i) and (iii) of §21 above. It was not.

31.  The Defendant’s construction of Clause 17.2 presents a further difficulty. It would mean that the Guarantors have no role to play at all. The positive obligation imposed is on each of the Issuer and the Guarantors. If all that was intended was that a Schedule 3 meeting be convened as the Defendant contends, it was unnecessary to involve the Guarantors. The Issuer alone is able to convene such a meeting: see §1.7 of Schedule 3. There must have been a purpose in involving the Guarantors in a case of voluntary retirement by a sole trust corporation. On the Defendant’s construction, no such purpose exists.

32.  On the Plaintiff’s construction, the proviso[8] at the beginning of Clause 17.1 makes sense because Clause 17.1 does not apply to situations (ii) and (iii) to which Clause 17.2 applies instead. The Defendant’s construction would render the proviso otiose.

33.  Moreover, the proviso cannot apply to the trustee’s powers to appoint new trustees under Clause 17.2. Similar powers to appoint new trustees were given to the trustee under Clause 17.3. Yet, Clause 17.1 is not said to be subject to Clause 17.3.

34.  The Plaintiff further submits that its construction accords with commercial sense. Situations (i) and (iii) concern replacement against the incumbent trustee’s wishes. Requiring the Bondholders’ consent provides an additional layer of protection for the incumbent trustee. Such protection is unnecessary where it is the trustee who voluntarily retires.

35.  On the construction issue, I consider the Plaintiff's construction to be correct. On that basis the need for an extraordinary resolution for the Plaintiff’s appointment does not arise.

(B)  Estoppel by deed

36.  An estoppel by deed results from a statement in a deed. If upon the true construction of the deed, the statement is that of both or all the parties to the deed, the estoppel is binding on each party; if otherwise, it is binding only on the party making it. The estoppel therefore binds as an agreement made under seal to admit the relevant statement: see Halsbury’s Laws of England, 5^th Ed. (2021), Vol 47 at §304.

37.  The following provisions in the DRA are relevant:

Recital (E): By extraordinary resolutions dated 20 June 2024 (the “Extraordinary Resolutions”), the Bondholders consented to, among others, (i) the voluntary retirement of the [Original] Trustee as the trustee of the Bonds .. (iii) the appointment of the [Plaintiff ] as the trustee of the Bonds ... and authorised, directed, requested and empowered the [Original] Trustee ... to execute this [DRA] and [the Plaintiff] ... to execute certain amendment documentation including this Deed to effect these retirements and appointments.”

(F): The parties hereto wish to record voluntary retirements of the [Original] Trustee ... and the appointments of the [Plaintiff] ... and to make certain consequential modifications to the Transaction Documents ... to reflect such retirements and appointments.

Clause 2.1: In accordance with Clause 17.2 (Retirement and Removal) of the Trust Deed… the [Original] Trustee hereby gives notice of its retirement as trustee to the Issuer and the Guarantors, and the Issuer and the Guarantors hereby agree to waive the requirement in Clause 17.2… for at least 45 days’ written notice…”

Clause 3.1: With effect from the Effective Time, the Issuer and the Guarantors appoint:

3.1.1: [the Plaintiff] as Trustee under (and as defined in) the Transaction Documents as replacement of the [Original ]Trustee...”

…

Clause 3.2.With effect from the Effective Time, the Successor Trustee …

3.2.1 [the Plaintiff] accepts its appointment (as applicable) as trustee of the Bondholders and under the Bonds … on the terms of the Transaction Documents”.

38.  Clause 6 of the DRA further provides that every reference to the Original Trustee in the documents executed shall, from the Effective Time, be construed as references to the Plaintiff.

39.  Both the operative provisions and the recitals in the deed are capable of giving rise to estoppels. Statements made in the operative parts of the deed give rise to an estoppel by virtue of the fundamental principle of the common law which precludes a grantor from disputing the validity or effect of his own grant: Phipson on Evidence (20^th Ed) at §5-09; Taylors Fashions Limited v Liverpool Trustees Co Limited [1982] QB 133, 159D-E.

40.  The Plaintiff submits that the Defendant who executed the DRA is estopped from arguing that the Bondholders did not in fact so consent to the Plaintiff’s appointment as the new trustee.

41.  The Defendant’s submissions are considered under the headings below.

(a)  No estoppel by deed on a matter of legal effect

42.  The Defendant’s stance is that unless the Resolution appointing the Plaintiff on 20 June 2024 is an Extraordinary Resolution within the meaning of the Trust Deed, the Defendant is not estopped from saying that the Resolution passed is not what is required under the Trust Deed.

43.  In support, the Defendant cited PW & Co v Milton Gate Investments Limited [2004] Ch 142, a case that concerned a dispute between PW as a former tenant and Milton Gate its former landlord arising out of the proper construction of clause 5(6) of the head lease set out in §13 of the Judgment[9]. One of the issues was whether Milton Gate was estopped from contending that the underleases terminated with the head lease.

44.  The Defendant relied on the following passage from the judgment of Neuberger J (as he then was) at §153:

“In the present case, far from being a clear and unambiguous express statement as to present fact, clause 5(6) appears to me to encapsulate an agreement as to what may arise in the future as a matter of law: I use the word ‘may’, because the event is dependent upon a notice being served under clause 5(6), and upon there being extant permitted underleases at the date such notice takes effect. I do not think that that can found an estoppel by deed.”

45.  The proposition of law the Defendant derives from that passage is that there can be no estoppel by deed on a matter of legal effect (as opposed to a matter of pure fact).

46.  However, properly understood, estoppel by deed was inapplicable in the PW case because clause 5(6) was not a clear and unambiguous express statement as to present fact. Clause 5(6) was dependent on what may happen in the future and did not refer to a present state of affairs. It was dependent upon the lessee serving a notice under clause 5(6) by a certain date and upon there being extant permitted underleases at the date such notice took effect. It was thus an agreement as to what may happen in the future and that does not support an estoppel by deed. The PW case is not an authority that supports the proposition advanced by the Defendant.

47.  Neuberger J considered that his conclusion at §153 of the PW case[10] was also consistent with the example[11] Park J gave in CP Holdings Ltd v Dugdale[12].

48.  The Defendant further relied on CP Holdings as authority for the proposition that the parties’ agreement on the legal effect of the particular document is not binding and would not create an estoppel.

49.  The extract taken from CP Holdings concerned the application of the doctrine of estoppel by convention where the parties enter into an agreement having a shared belief that the new agreement will have a particular meaning. The parties are not estopped from arguing that their shared belief was wrong. It stems from the notion that the legal effect of a document is a question of law for the Court: Lewison on The Interpretation of Contracts (8^th Ed) at §10.66.

50.  In the present case the question that arises is not about the construction or legal effect of the DRA. Rather, it concerns a question of fact, namely, the fact that there was the EGM by which the Bondholders consented to Plaintiff’s appointment as successor trustee and that the Defendant had also granted the Plaintiff the trusteeship. CP Holdings does not assist in the present context.

(b)  Estoppel by deed cannot arise by way of implication

51.  The Defendant cites the PW case at §§150 and 152 for the proposition that an estoppel by deed must be founded on a clear, precise and unambiguous express statement and cannot arise by way of an implication from what is so expressly stated however clear that application may be[13].

52.  The proposition advanced requires qualification. The preferable view appears to be that if a term is implicit in the express terms of the deed it may found an estoppel and, if omission of the specific fact is necessarily implicit in a general proposition, it may also found an estoppel: see Halsbury’s Laws of England, 5^th Ed (2021) at §320.

53.  The Defendant submits that there is an ambiguity in the word “Bondholders” in Recital (E). It could be read as meaning the underlying beneficial owners of the Bonds which is consistent with the definition of “Bondholder” in the Notice of Meeting and the Memorandum or DB Nominees, the registered holder of the Bonds.

54.  Clause 1 of the DRA deals with “Interpretation”. Clause 1.2.1 provides that unless a contrary intention appears (as applicable), a term defined in the relevant Transaction Document shall have the same meaning in the DRA. As the Trust Deed is included in “Transaction Documents”, and the word “Bondholders” is defined in the Trust Deed, that definition necessarily applies to the word “Bondholders” in the DRA.

55.  Therefore, there is no ambiguity: it means DB Nominees.

(c)  Collateral action

56.  The Defendant further contends that this action is not an action on the DRA but a collateral action between the parties to the DRA: the Plaintiff is suing on the Guarantee in respect of which there can be no estoppel by deed, citing Tang Teng Hong Tso v Cheung Tin Wah [2014] 2 HKLRD 1032 at §38. That paragraph sets out a passage from Wilken and Ghaly, The Law of Waiver, Variation and Estoppel (3^rd ed., 2012) para 12.37 which gave an illustration of a collateral action[14].

57.  In Re Patrick Corporation Ltd [1981] 2 NSWLR 328, company A executed a deed of guarantee in favour company B. They subsequently executed a deed of acknowledgement and confirmation expressed to be supplemental to the deed of guarantee. The court held that the parties were bound by estoppel by deed arising from the 2^nd deed given that “the liability of [A] arises because of the confluence the two deeds.”

58.  Here, the Plaintiff was appointed trustee under the Transaction Documents that comprised, inter alia, the Guarantee and the Trust Deed. Clause 5 of the Guarantee provides that it shall enure for the benefit of the Trustee and any successor trustee under the Trust Deed on behalf of itself and the Bondholders.

59.  The Plaintiff seeks to enforce the rights arising out of the DRA. Its standing to sue is based on Clause 3.1.1 and 6 of the DRA. In its SOC, the Plaintiff expressly pleaded and relied on the DRA[15]. Adopting the terminology used in Re Patrick Corporation, the Defendant’s liability to the Plaintiff arises ‘because of the confluence’ of the Guarantee and the DRA.

(d)  Mistake

60.  The Defendant cited Greer v Kettle [1938] AC 156 at 171 for the proposition that a party to a deed is not estopped in equity from controverting a recital which has been introduced into the deed by mistake. But if reliance is being placed on a mistake, there has to be evidence of the mistake and an explanation as to why it is a mistake.

61.  The difficulty with the submission is that nothing in Zhao 1^st addresses the alleged mistake in the DRA. There is no basis for this defence.

(e)  Conclusion

62.  As I have rejected the defences raised, it follows that the Defendant is estopped by deed from disputing the validity of the appointment of the Plaintiff as the Trustee.

(C)  Estoppel by convention

63.  The Plaintiff further contends that the Defendant is also estopped by convention.

64.  The Issuer convened the 2024 EGM to obtain the consent of the holders of its outstanding Bonds (guaranteed, inter alia, by the Parent Guarantor (ie the Defendant) to two Extraordinary Resolutions set out in the Notice of Meeting[16] sent out on 14 May 2024. Under the heading “VOTING AND QUORUM”, Bondholders were informed of the voting procedure after which the Notice stated:

“For these purposes while the Bonds are represented by the Global Certificate, the holder of the Bonds shall be [DB Nominees] as the registered holder.”

65.  It is clear from that statement that all concerned recognised that DB Nominees is the registered holder of the Bonds.

66.  The Minutes of the 2024 EGM show that those in attendance included Mr Zhao on behalf of the Defendant. Before the meeting commenced, the chairman noted that a quorum was required. DB Nominees was not present. The chairman declared that there were present at the meeting 2 persons present in person holding Bonds or being proxies representing over 95.73 % in principal amount of the Bonds and that accordingly a quorum was present. No one (including the Defendant) raised any objections.

67.  This shows that the parties treated the meeting as quorate, notwithstanding DB Nominees’ absence. The Meeting proceeded to consider, inter alia, the Resolution which was passed by 92.85% of the votes cast.

68.  The essential elements of an estoppel by convention were restated by Ribeiro PJ in Unruh v Seeberger (2007) 10 HKCFAR 31 at §79[17].

69.  The Plaintiff highlighted the following matters:

(i)  DB Nominees is the nominee of the common depository on behalf of the clearinghouses and thus the mere conduit by which the ultimate bondholders hold the Bonds;

(ii)  Given DB nominees’ nominal role, the EGM Notice issued by the Issuer (the Defendant’s wholly-owned subsidiary) was directly sent to the ultimate bondholders who gave voting instructions[18] via their clearinghouses to the nominated agent (Morrow Sodali Limited (“MSL”).

(iii)  The 2024 EGM was convened and a quorum was declared. No quorum objection was raised at the EGM, even though the Defendant sent two representatives to attend.

(iv)  The two representatives of MSL duly voted in accordance with the instructions of the ultimate bondholders, and the Resolution was passed by a majority of 92.84%.

(v)  The Defendant executed the incumbency certificate describing the Plaintiff as the “successor trustee”. On the following day (21 June 2024) the Issuer issued a public announcement, announcing that the Resolution was duly passed with the requisite quorum and the DRA was executed by the parties thereto. The Issuer further executed (and Mr Zhao signed as a Director of the Issuer) the “Certificate of the Issuer Confirming the Effective Time[19]” which also describes the Plaintiff as the “successor trustee”.

(vi)  This manner of convening the 2024 EGM (i.e. not requiring DB Nominees to attend) had been adopted by the parties at the previous EGM held in 2021 (the “2021 EGM”), where the Original Trustee was appointed in place of the prior retiring trustee. In essence, the 2024 EGM replicated the practice (in the drafting of the EGM Notice which was not sent to DB Nominees) that had been adopted for the 2021 EGM.

70.  Based on those matters, the Plaintiff submits that the Defendant is precluded by estoppel by convention to contend that DB Nominees must attend the 2024 EGM. The Plaintiff and the Defendant were acting on the common understanding that DB Nominees need not attend the 2024 EGM. Instead, it is the ultimate bondholders who should give instructions.

71.  That common understanding thus underpinned the convening of the 2024 EGM, the passing of the resolutions, the execution of the DRA and the Plaintiff commencing work as a trustee under the Trust Deed[20]. By executing the DRA and affirming the Plaintiff’s status as the successor trustee after the 2024 EGM, the Defendant and the Issuer clearly confirmed their endorsement of the validity of the Plaintiff’s appointment.

72.  At the meeting, the Extraordinary Resolutions were passed by over 92% of the votes cast. In those circumstances, it is inconceivable that had DB Nominees been present, it would have voted differently.

73.  Mr Tai disagreed and invited attention to Euroclear’s operating manual where, under the heading “Voting” at 5.3.2.7 (c), Euroclear appears to reserve the right not to take any action in connection with the voting of securities.

74.  No authority was cited concerning the exercise of that right. Its scope and extent remain untested. Moreover, it appears to be at odds with Euroclear’s obligations under the provisions in 5.3.2.7.1 and 5.3.2.10. How the provisions are to be reconciled is unclear.

75.  DB Nominees is but a nominee with no beneficial interest in the Bonds. That it would vote in defiance of the wishes of the ultimate beneficial owners is unthinkable.

76.  The Plaintiff nevertheless sought DB Nominees’ confirmation by email whether

(1)  if DB Nominees had attended the meeting it would have voted in accordance with the instructions of the Bondholders; and

(2)  that the meeting on 20 June 2024 was conducted in accordance with past practice for conducting Bondholders meetings for the purposes of passing extraordinary resolutions relating to the Bonds.

77.  DB Nominees’ reply reads:

“We see this is a default deal and matured on 26 Aug 2024.

We did not attend any bond holder meeting in past.”

78.  While the answer to (1) is enigmatic, if not incomprehensible, it is clear that DB Nominees have never attended any bondholder meeting in the past. That is hardly surprising having regard to §69(vi) above. The Trust Deed requires that there be a Certificate representing Bonds that will “initially” be registered in the name of a nominee of the Common Depository and/or of any other alternative clearing system. A nominee is just that. Those who successfully subscribe for Bonds and put up the funds for them are the ultimate beneficial owners.

79.  On the Defendant’s reasoning, because DB Nominees is the only entity registered in the register of holder of the Bonds, it will be treated as its absolute owner for all purposes[21]. If, as is the Defendant’s position, economic interest in the Bonds is vested in DB Nominees, it is telling that after being apprised of the 2024 EGM and the Resolution, DB Nominees have not taken any action to assert that interest. No doubt, it recognises that while being the registered holder of the Bonds, it is but a nominee.

80.  That the Defendant should advance an argument that is singularly lacking in merit is surprising, given its role in the 2024 EGM and DRA, and in particular, in granting the Plaintiff the trusteeship.

81.  The Plaintiff submits that it would be unjust and unconscionable for the Defendant to argue now that DB Nominees’ attendance was necessary for the 2024 EGM to be quorate.

82.  The Defendant’s position is that it could hardly be just and conscionable for DB Nominees to be adversely affected by this estoppel when it was not a party to the common assumption, citing a passage from Michael Barnes KC, Law of Estoppel (1^st Ed., 2020) at §§5.82-5.83 concerning a multiparty transaction and Trustee Solutions Limited v Dubery [2007] 1 All ER 308 at §51 in support.

83.  When pressed for evidence of the respects in which DB Nominees is said to be adversely affected, the Defendant referred to clause 3.4 of the Trust Deed which cannot assist the Defendant for the reasons set out above.

84.  DB Nominees is a nominal party. It is bound by the relevant rules of procedure of the relevant clearinghouses to vote according to the ultimate bondholders’ instructions. It has no separate and independent interest to advance. How estoppel could adversely affect DB Nominees is simply unfathomable.

85.  The Defendant’s further argument is that there is a triable issue as to whether and what common understanding was formed between the parties.

86.  The Defendant submits that it is inherently improbable if the parties did appreciate the proper voting party is DB Nominees they would take the risk of the meeting being invalidated. It is thus at the very least arguable that the parties did not direct their minds to the issue of the validity of the Resolution. For otherwise, it is difficult to explain why the commercially sophisticated parties deliberately cut corners when there is no apparent benefit but significant risk for them to do so. If that were the case it is insufficient to found an estoppel because it is not enough that each of the 2 parties acts on an assumption not communicated to the other: Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878 at 913F.

87.  I have no hesitation in rejecting this last point wholesale. The 2024 EGM and the DRA form part of one transaction. That transaction comprised the EGM Notice, the Tender Offer, the Consent Solicitation Memorandum, the DRA and the Incumbency Certificate. The purpose of the transaction was to secure the consent of the ultimate beneficial holders of the Bonds to, inter alia, the Resolution. All parties involved (including the Plaintiff and the Defendant) were well aware that DB Nominees was the registered holder of the Bonds represented by the Global Certificate.

88.  When the transaction is viewed against the backdrop of the matters set out in §§ 10-12 above and the fact that the practice adopted for this transaction replicated that of the 2021 EGM, the notion that there is a triable issue as to whether and what common understanding was formed between the parties is absurd.

(D)  The irregularity principle

89.  The Plaintiff submits that any irregularity of the 2024 EGM does not affect its outcome given that DB Nominees’ role is that of a nominee who could not have voted differently from the ultimate holders of the Bonds. If what has been done irregularly is capable of being and will be confirmed by the majority, the Court will not interfere: Re Dalny Estates Ltd [2018] 1 HKLRD 409 at §22. An inquorate meeting is capable of being cured by the irregularity principle: Re Dalny at §18.

90.  The Defendant’s submissions stem from its stance that DB Nominees have an independent interest that is beyond the competence of the majority to regularise. The Defendant also attaches significance to the email exchange considered in §§76-78 above, suggesting that the Plaintiff is unable to satisfy the ‘inevitability’ element for the irregularity principle to apply.

91.  As explained in §§69-79 above, I am unable to accept that DB Nominees are entitled to vote differently from the wishes of the ultimate beneficial owners of the Bonds.

92.  At the end of the day, whether or not the irregularity principle is applicable can have no impact on the outcome of this application.

Disposition

93.  This appeal is dismissed.

94.  I make an order nisi of costs in favour of the Plaintiff, such costs to be summarily assessed and payable forthwith.

95.  I further direct that (i) the Plaintiff do lodge its statement of costs within 14 days; (ii) the Defendant to lodge its list of objections (limited to 2 pages) within 14 days thereafter.

96.  Summary assessment will take place in Chambers.